Curious about drop in Experian score

[Anonymous]

Last year at this time, my Experian score was about 20 points higher than it is today. I'm sure to people who understand such things, it will be obvious why, but I don't get it.

Last year, I had one credit card with 55 percent utilization. I paid off the debt on that card through painstaking effort. Now I have five cards with more or less 0 utilization. For the past eight months I've paid my credit card balances in full every month. I have no new delinquencies (I paid a bill 30 days late five-plus years ago). One big financial event is that I refinanced my mortgage a few months ago. Can it really be that I've taken the hit with Experian because of the refi and all my shiny new credit cards (and attendant credit checks)?

I can't imagine any bank would really have been more comfortable lending me money last year than this year! My Equifax and Transunion scores are higher now than the were a year ago. 

[CH-7-Mission-Accomplished]

New accounts (cards and mortgage) opened, new inquiries, and having your mortgage now show essentially 100% of the original (new amount) owing will knock you down for a bit.

Don't apply for anything new for the next year.  Within six months your scores will improve and within a year they will likely exceed your old scores.

When you got your new mortgage, it was based on your profile at that moment.  Now your profile has inquiries, new credit cards and a mortgage balance near its booked amount.

Whenever you get new credit you can expect to take a hit for awhile, but you get the points back quicklly.

Only allow one credit card to report a balance and make sure that balance is only $5.  Your utilization is based on reported balance on the statement dates.  

[Anonymous]

Thanks. That makes complete sense! I guess I'll go into hunker-down mode!

[SouthJamaica]

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@Anonymous wrote:

Last year at this time, my Experian score was about 20 points higher than it is today. I'm sure to people who understand such things, it will be obvious why, but I don't get it.

Last year, I had one credit card with 55 percent utilization. I paid off the debt on that card through painstaking effort. Now I have five cards with more or less 0 utilization. For the past eight months I've paid my credit card balances in full every month. I have no new delinquencies (I paid a bill 30 days late five-plus years ago). One big financial event is that I refinanced my mortgage a few months ago. Can it really be that I've taken the hit with Experian because of the refi and all my shiny new credit cards (and attendant credit checks)?

I can't imagine any bank would really have been more comfortable lending me money last year than this year! My Equifax and Transunion scores are higher now than the were a year ago. 

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You've actually provided multiple possible reasons:

1. you probably owe a higher percentage of the face amount of the new mortgage

2. new cards mean reduced average age of accounts

3. new cards mean recent inquiries

All of the above put downward pressure on your scores

If you want to increase the scores your best bets would be:

(a) pay the mortgage at an accelerated rate if possible (you'll probably get a small pop when you get it below 80%)

(b) keep utilization on credit cards low by paying off before statement date

(c) apply for no new credit, let inquiries age, and let accounts age

[Anonymous]

Thanks for the helpful information! 

[SouthJamaica]

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@Anonymous wrote:

Thanks for the helpful information! 

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My pleasure, absweetmarie

[elim]

It takes awhile to give your new accounts the age they need to get your scores back up (and they will get even higher then they were). Also great point on letting a card or two report a small balance. Mine works better with 2 cards reporting a few percent. You may get back your 20 points just by doing that (mine fluctuate about 15 points).